Partner Sites

Logo BusinessBecause - The business school voice
mobile search icon

MBA Graduates Join Uber's Cab Craze With Smartphone Start-Ups - And Bank $25M

As taxi hailing service Uber kicks-up global controversy, MBA graduates from INSEAD and Harvard have launched similar smartphone ventures - one raising more than $25M in funding.

Wed Jun 25 2014

London’s black cab drivers have made a reputation for themselves as cheeky-chappies full of tongue-in-cheek humour which impresses tourists, but even by Londoners’ standards, this was a particularly rude rant.

“Our beef with Uber is that these drivers have come straight into London, and have been licensed straight away by Transport for London,” Lloyd Baldwin, a black cab driver, told the BBC. “We're regulated to within an inch of our lives.”

His distain was aimed at Uber, the smartphone start-up that has generated eye-watering valuations while kicking-up a political storm at the same time.

Uber’s app allows users to hail a taxi from any location with the swipe of a finger across a screen. The four-year-old firm is already valued at $18 billion. The San Francisco-based company has expanded its operation into more than 100 cities across 30 countries.

The founders’ success is shrouded in controversy. Earlier this month, thousands of taxi drivers across Europe staged protests against their technological rival. Cabbies complain that Uber’s drivers use the software as a meter, which under current law is illegal for private hire vehicles, and that anyone with a Private Hire Vehicle (PHV) licence can sign up with them.

The confrontation highlights a decisive shift in the power base of the driving industry. Upstarts are clearly making their mark. Other start-ups including Lyft, Hallo and Sidecar have secured millions in funding for their fledgling taxi apps.

MBA students are also using taxi tech to stage their assault on the driving sector. Graduates from Europe’s INSEAD, and Harvard Business School, are entering the cab-hire craze.

GrabTaxi, hailed as Southeast Asia's answer to Uber, was co-founded by a Harvard MBA graduate. GrabTaxi supporters argue that drivers no longer have to navigate through traffic-clogged streets that are common in Asian cities. This popularity allows the company to charge a commission with every booking.

“Our ultimate vision is to pioneer public transportation mobility for all,” the company said. “By combining top talent, disruptive technologies and innovation, a local start-up like us can surpass even the most developed countries.”

The disruptive start-up has joined a growing roster of tech companies looking to offer cheap taxi bookings to lure in customers who need a ride.

Anthony Tan, GrabTaxi's Malaysian chief executive and co-founder, stumbled onto the idea while in business school. A Harvard colleague suggested he follow in the footsteps of his grandfather, who helped launch the Japanese automotive industry in Malaysia.

Anthony, along with Tan Hooi Ling, an MBA classmate, entered Harvard Business School’s 2011 Business Plan Contest, and finished as runners-up. With funding from Harvard and personal coffers, they launched their app in June 2012.

In the two years since, GrabTaxi has expanded into five more countries in 14 cities. The app has been downloaded more than 1.2 million times, and more than 250,000 people use it on a monthly basis.

The business is backed by GGV Capital, a Silicon Valley and Shanghai-based venture capital fund, which led a recent investment round that banked the founders more than $15 million in capital, on top of an earlier round of more than $10 million. The app is also backed by Brent Hurley and Steve Chen, the co-founders of YouTube.

GrabTaxi said it wants to “help bring Southeast Asians to the forefront of the technological development wave”. “We hope to one day become a successful example to others who wish to pursue this daunting road of technopreneurship,” the company said.

Uber has written the instruction manual on how to launch a successful tech start-up. But other entrepreneurs have plans to rival their disruption. A Berlin-based start-up firm has joined the flock.

Talixo, which has 30 taxi companies operating under its banner, is headed by three INSEAD MBA graduates. The founders claimed a slice of a €50,000 pot from the business school’s twice-yearly Venture Competition.

Founders Yvonne Gruendler, Sebastian Kleinau and Dominik Etzweiler used their €25,000 winnings to set-up the business, similar to GrabTaxi, last summer.

But Yvonne, who comes from the healthcare sector, says Talixo's unique 50-50 split of taxis and limousines, and the ability to pre-book is what separates them from competitors.

“Most taxi companies have one type of vehicle, private hire pre-booking or standard taxis,” she says. “There's a legal distinction between taxis and private hire vehicles, so with limousines there's no regulation on pricing,” she added.

The fledgling firm focuses on B2B sales and corporate clients. Talixo has three separate categories for their limousine service: economy, business and first-class, and each has different perks, standards and prices.

All three MBAs worked on the project during business school. Sebastian and Dominik founded the company and Yvonne joined them soon after graduating.

Much like Uber did, the team plan to expand. Yvonne says they were attracted to Germany because of the ease with which they can expand across the country.

“We are looking at expansion right now and hope to be able to get fleets into other cities. The plan is to roll out across Germany and into the main cities,” she adds.

Black cab drivers may be in uproar, but Yvonne recognizes their expert knowledge, which she says isn’t guaranteed with standard mini-cab drivers.

“For most people, it's a commodity: there's no difference from one [taxi company] to another. But we have a difference in quality,” she adds.